2017 Annual Report LINK Mobility Group AS
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LINK Mobility Group ASA Annual financial report 2017 Mobilizing Your Business Report from the Board of Directors LINK Mobility Group ASA is the parent company of the Link Mobility Group, and owns 100 per cent of the subsidiaries Link Mobility AS and Vianett AS in Norway, Link Mobility AB in Sweden, Link Mobility SIA in the Baltics, LINK Mobility A/S and LINK Mobile A/S in Denmark, LINK Mobility GmbH, and GfMB Gesellschaft für Mobiles Bezahlen mbH in Germany, LINK Mobility Oy and Labyrintti International Oy in Finland, LINK Mobility Spain S.L.U and Global Messaging Solutions S.L.U in Spain, Voicecom AD in Bulgaria, Comvision Sp.z.o.o in Poland and Netmessage SAS in France. Link Mobility Group (LINK), with its 308 employees, is headquartered in Oslo and have offices in Oslo, Bergen, Stockholm, Malmö, Kolding, Tallinn, Copenhagen, Hamburg, Tampere, Helsinki, Gliwice, Sofia, Madrid and Paris. LINK has more than 15 years of experience in providing mobile messaging services and mobile solutions for companies, public services and organizations. After a year of substantial and profitable growth, LINK has taken the #1 position within mobile messaging and solutions in Europe. This is an excellent foundation for LINK to leverage on market position and operational scale in a large European market with strong potential for far greater penetration levels and usage of LINK´s mobile messaging and solutions services. LINK is now the leading provider of B2C mobile messaging and mobile solutions in the Nordic, Polish, Bulgarian, Spanish and German markets. LINK has become one of Europe’s leading, and fastest growing companies within the industry. Market – position and development The overall market trend towards “mobilization of businesses” is getting stronger by the year, and the total market for B2C mobile services experienced a solid growth in 2017. Customers who have first started using mobile communications in one area, tend to move more and more business activities to mobile platforms. The Scandinavian markets are regarded as advanced in terms of adopting mobile technologies and services. Scandinavian organizations are 2-4 years ahead of their counterparts in other markets in taking mobile messaging services into use. LINK has a comparative advantage when entering new markets. Highly developed technological platforms, advanced services and solid reference cases, will make LINK able to expand the market potential when entering new geographical markets. LINK continued to outperform the market. In 2017 LINK sent 6.3 billion messages (includes the full year effect of acquired entities) on behalf of its more than 16.500 customers. On average, LINK sent messages to more than 200 million unique mobile subscribers monthly. LINK is regularly delivering mobile messages to the majority of mobile users in its main markets. LINK is continuing to experience a high degree of recurring revenue combined with increased revenue per customer as most of the customers increase their use of LINK’s various mobile services. Through the use of LINK’s mobile services, LINK’s customers increased their revenue through efficient communication with their customers, and they were at the same time reducing costs by running more efficient internal processes. LINK is experiencing an increased demand for integrated mobile solutions such as customer clubs, statistical and analytical tools, databases, payment solutions, strategic advice and numerous other mobile services. Annual report 2017 2 / 87 Mobilizing Your Business LINK generated a total revenue of NOK 1 294 million in 2017, representing an increase of 108 per cent compared with 2016. Including the full year effect of companies acquired in 2017, LINK achieved a pro forma revenue of NOK 1 754 million, and an adjusted EBITDA of NOK 209 million (12 per cent). LINK delivered 6.320 million messages in 2017 (pro forma figures). There was solid growth in all business segments: • LINK Mobile Messaging delivered NOK 1 106 million in revenue, up 138 per cent from 2016 • LINK Mobile Solutions sold business applications at the total value of NOK 188 million, up 20 per cent from 2016 LINK also experienced solid revenue growth in all main geographical markets in 2017: • LINK Norway had a revenue of NOK 466 million, up 39 per cent from 2016 • LINK Sweden had a revenue of NOK 148 million, up 47 per cent from 2016 • LINK Denmark had a revenue of NOK 120 million up 19 per cent from 2016 • LINK Germany recorded a revenue of NOK 295 million • LINK Finland recorded a revenue of NOK 63 million • Acquisition in Spain, Bulgaria, Poland and France reported revenues of NOK 197 million The revenue growth was due to substantial organic growth combined with the acquisitions of Didimo (closed March 31 2017), Vianett AS (closed 15 August 2017), Global Messaging Solutions (closed 28 September 2017), VoiceCom (closed 2 October 2017), Comvision (closed 19 October 2017) and Netmessage (closed 31 October 2017). The organic growth and acquisitions increased LINK’s footprint significantly. By the end of 2017, LINK has the following estimated markets share within A2P segment: • 65 per cent of the Norwegian market, LINK being the market leader • 40 per cent of the Swedish market, LINK being the market leader • 55 per cent of the Danish marked, LINK being the market leader • 40 per cent of the Finnish market, LINK being the market leader • 40 per cent of the German market, LINK being the market leader • 40 per cent of the Spanish market, LINK being the market leader • 40 per cent of the Bulgarian market, LINK being the market leader • 40 per cent of the Polish market, LINK being the market leader • 5 per cent of the French market The market for mobile messaging and mobile solutions is expected to continue to experience double- digits growth over the coming years as more and more private companies, public services and organizations recognize the importance of offering their customers and users mobile communication and services. LINK has a clear strategy of continuing the rapid growth by increasing its market share in existing markets and by entering new markets. This is to be obtained through a combination of organic growth and acquisitions. The Scandinavian market for developing and deploying state of the art mobile solutions is amongst the most innovative in the world. LINK intends to capitalize on the knowledge from the Nordic markets to access and expand new underdeveloped markets. Risks LINK has identified three types of risk factors that can prevent successful implementation of its business strategy or manage its growth effectively: market risk, financial risk and acquisition risk. Annual report 2017 3 / 87 Mobilizing Your Business Market risk LINK’s market share for B2C mobile services have grown rapidly over time through both organic growth and through acquisitions. LINK benefits from a unique competitive position. LINK is by far the largest player in the the Nordic, Polish, Bulgarian, Spanish and German markets resulting in economies of scale relating to capacity and competences for developing and launching new products, broad existing product offerings and a solid expertise in operations and system integrations towards customers. Based on its market and competitive advantages, LINK builds long term customer relationships through high quality of services, system integration and development of new products and solutions. LINK has very low customer churn in all markets. Customers who have first started using mobile communications in one area, tend to move more and more business activities to mobile platforms. LINK’s revenue, costs and profits are subjected to the risk of changes in customer prices. As the market is expanding, margin pressure is to be anticipated in some parts of the market. The price pressure is likely to be focused on wholesale/bulk SMS and basic mobile payment services. LINK will therefore continue its strategy of delivering value added services to its customers through LINK Solutions and LINK Mobile Intelligence, in order to both maintain its profit margins and to establish even stronger links with its customers. LINK’s broad specter of mobile services enables LINK to offer its customers complete mobile solutions that cover multiple needs. This creates high customer satisfaction for LINK’s customers, as well as creating close relationships between LINK and its customers. These factors reduce the price risk. Financial risk LINK’s activities expose it to financial risks, such as price, currency, liquidity, interest rate and credit. Overall, these risks are regarded as low. By being the leading provider and thus the largest buyers of SMS in its markets, LINK is able to purchase SMS from the telecom operators at favorable prices. Additionally, LINK’s position ensures priority from the operators securing high quality in terms of delivery reliability. LINK’s subsidiaries are operating in their local currencies NOK, SEK, DKK, PLN, BGN and EUR. Revenue and cost transactions are carried out in the same currency, which reduces the currency risk. However, as LINK’s overall financial reporting is reported in NOK, changes in the value of SEK, DKK, PLN, BGN or EUR in relation to NOK, affect LINK’s overall revenue and financial position. LINK is also exposed to exchange risk regarding senior secured bond loan and sellers credit in EUR. LINK has from July 1, 2017 designated the senior secured bond loan and sellers credit in Euro as hedging instruments of the net investment in foreign operations (net investment hedges). Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognized in other comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss within other income or other expenses. LINK considers its liquidity risk to be limited, and has significant liquidity available on bank accounts as of year-end 2017.